This course will teach you the tools you'll need to understand the fundamentals of financial accounting. Concise videos, the financial records of a small business, and "your turn" activities guide you through the three most commonly used financial statements: the Balance Sheet, the Income Statement, and the Statement of Cash Flows. Beyond recording transactions, you'll learn how to prepare these financial statements, and read and analyze them to draw basic conclusions about a company's financial health.
By the end of this course, you will be able to:
- Use journal entries to record transactions
- Prepare and use t-accounts to summarize transactions recorded during an accounting period
- Describe the three most commonly used financial statements and how they fit together
- Prepare these financial statements based on transactions recorded during an accounting period
- Draw basic conclusions about a company's financial health

YY

This course gives me a practical understanding of accounting principles and key financial statements, which is helpful for my work. Strongly recommend to my friends and colleagues

LM

Apr 13, 2018

Filled StarFilled StarFilled StarFilled StarFilled Star

Really enjoyed the course - was really dreading learning about accounting but the instructor was able to break it down and make it both fun and interesting for me to learn!

レッスンから

More Transactions, Analysis of Financial Statements, and an Annual Report

During this last week, we’ll walk through the second year of operations for our fictional startup company, The Garden Spot (TGS Year 2), for additional practice recording transactions and preparing our end-of-period financial statements. Then, we’ll do some analysis of The Garden Spot’s financial statements. Finally, we’ll take a look at PepsiCo’s Annual Report as an example of reporting for a publicly traded U.S. company.

講師

Luann J. Lynch

Almand R. Coleman Professor of Business Administration

字幕

Now let's move to the statement of cash flow. Let's start by doing something very simple. Let's just look at the signs of cash flow from operating activities, cash flow from investing activities and cash flow from financing activities, and total cash flow. The signs themselves whether positive or negative can tell us volumes of information about what's happening at the company. In the first year, total cash flow is positive. However look at cash flow from Operating Activities. It is negative. Our initial reaction might be one of concern that the company did not generate cash from this operations. However, remember this is a startup so we might be a little bit more patient. Notice in the second year, cash flow from Operating Activities has turned positive. Now let's look at cash flow from Investing Activities. That is negative in both years. And cash flow from Financing Activities is positive in both years. Now what would we expect? We would like to see a positive cash flow from operating activities. We would hope that a company can generate a positive cash flow from its day to day operations. But it might take some time for a startup to begin generating positive cash flow from operations. What about cash flow from investing activities? Well, we might expect that to be negative as the company invests to grow the business. Cash flow from financing activities. That could be negative or positive depending on the company. You might expect it to be a relatively larger positive number early in a company's life cycle as it is trying to finance the initial startup of its business before it gets to the point that it can generate cash from operations. Now this is a pretty typical sign pattern for a startup company. Negative cash flow for Operating Activities. It's tough to start a business, generate cash from operations right away. Negative cash flow from Investing Activities as the company invests heavily in the initial startup of operations. And a positive cash flow from Financing Activities as a company must go somewhere to get the funds to invest in the assets that it's investing in. Notice in the second year we're seeing a similar sign pattern, except for the cash flow for Operating Activities has turned positive. Now let's look into more detail in each section. Let's go to the Operating Activities section. The main change from Year 1 to Year 2 is in net income. A very large increase in net income. We just talked about that when we were looking at the income statement. The company was able to generate a lot more revenues on the same base of operating cost. The increase in profitability was a big boost to cash flow. We also see that the increases in accounts receivable and inventory were not as high in Year 2 as in Year 1. They're still increasing, but recall though that the company's revenues grew 25%, and with increasing revenues, we would expect the companies accounts receivables and inventory to increase. Now let's go to the Investing Activities section. The company has been investing heavily, particularly in Year 2 with the purchase of the land. And the Financing Activities section in Year 1 most of the company's funds came from issuing stock. In Year 2 though, it relied less heavily on equity, or issuing stock, and obtained more funds from loans. The financing patterns have changed a bit from Year 1 to Year 2. Here's my recommended process when looking at the statement of cash flows. Start with the signs of total cash flow, cash flow from operating activities, cash flow from investing activities and cash flow from financing activities. The signs can tell a story in and of themselves. Then, dig deeper into each section to find out more detail about the cash coming from operations, what a company is investing in, how they're financing that investment and whether these things are changing over time.